EUR/USD Forecast: Break below 1.08 may only be the beginning, three reasons to favor the downside

• Eurozone PMIs crashed to record low levels amid the coronavirus crisis. 
• The EU Summit carries elevated hopes which may be shattered. 
• US economic figures may dampen the mood and strengthen the dollar.
• Thursday's four-hour chart is pointing to the downside.

Coronavirus carnage is becoming more evident – and that has sent EUR/USD below 1.08, the lowest in two weeks. 

Here are three reasons for the fall and why it may continue. 

1) Horrifying economic figures

How hard is coronavirus hitting the economy? Markit's preliminary Purchasing Managers' Indexes were expected to fall to record levels but the figures are more devastating than expected. The German Composite PMI fell to 17.1 points against 31 expected while any score below 50 represents contraction.

 

The services sector is leading the collapse with numbers in the teens, yet manufacturing PMIs in both France and Germany have also disappointed, falling to the lowest since the 2008-2009 crisis. The surveys were taken during early April when lockdowns were firmly in place.

The figures are set to continue echoing and weighing on the euro. They are compounded by German Chancellor Angela Merkel's statement to parliament, where she said that the virus is here to stay for a longer period. 

2) False hopes for the EU Summit?

Spain, France, and the European Commission have been working hard to mediate between the northern and southern camps, finding a solution that would provide a considerable fiscal boost as Italy and others want but refrains from sharing debt, as the Netherlands and Germany object. Sums of between €1.5 to €2 trillion have been thrown in the air. 

However, some of the money may be leveraged, it may reach the economies late, and has yet to be agreed upon. Hopes for a robust "bazooka" have been supporting the common currency but a potential "euro-fudge" – a diluted agreement may send it down.

See Yes, the future of the union is at risk, three scenarios for EUR/USD, including parity

3) US data may dampen the mood

Weekly Unemployment Claims are due out and may show that the world's largest economy lost over 4 million jobs in the week ending April 17. While that would be the third consecutive drop, the US labor market is suffering badly.

See Jobless Claims Preview: Progress or exhaustion in the US labor market

Shortly after, Markit's US PMIs will likely follow Europe's path and also paint a grim picture. ISM PMIs normally have more influence, but substantial falls may also weigh on the mood.

See US PMIs Preview: Looking into the abyss

It is essential to note that the safe-haven dollar has been gaining ground in response to downbeat figures – even if they are for the American economy. 

The figures could send stocks lower, reversing gains partially attributed to encouraging coronavirus statistics in the US, especially in New York. Governor Andrew Cuomo also noted a "very productive" meeting with President Donald Trump. From this relatively high point, things may go downhill. 

Overall, economic figures and the EU Summit will likely outweigh COVID-19 statistics on a busy day.

EUR/USD Technical Analysis

Euro/dollar is trading below the 50, 100, and 200 Simple Moving Averages, and momentum remains to the downside. Bears remain in the lead.

 Significant support awaits at 1.0770, which is April's low. It is followed by 1.0720, which was a stepping stone on the way up in March, and then by the 2020 low of 1.0640.

Some resistance is at last week's low of 1.0810, followed by 1.0835, the daily high. Wednesday's high of 1.0885 is a stronger resistance line and it is followed by 1.0930 and 1.0995. 

More: Coronavirus: Lack of leadership may lead to L-shaped economy, markets may suffer badly